Malaysia CPO prices seen softening on higher production figures

18 April 2011 07:37[Source: ICIS news]

SINGAPORE (ICIS)--Malaysia’s crude palm oil (CPO) production rose by 22.7% month on month to 1.42m tonnes in March, bolstering market sentiment that CPO prices will soften further in the coming weeks, industry sources said on Monday.

Malaysia’s CPO output in March increased by 321,693 tonnes from February and was 28,798 tonnes or 2% higher than figures from the same period a year earlier, according to data from the country’s palm oil board.

“This is good news. More CPO supply means that CPO prices would have to come down,” said a Singapore-based palm oil trader.

“When CPO prices are lower, more buyers will enter the market,” the trader added.

Market players told ICIS the rise in CPO production is likely to benefit the downstream sectors such as biodiesel that use CPO as a direct feedstock.

“The prices of biodiesel could become cheaper in the coming weeks and this will help to bolster exports,” said a Malaysian biodiesel producer.

Biodiesel prices were assessed at $1,200-1,220/tonne (€828-842/tonne) FOB (free on board) southeast Asia on 14 April, down by $20-70/tonne from 10 March. CPO prices were traded at Malaysian ringgit (M$) 3,289/tonne ($1,089/tonne) at midday on 18 April, down by M$111/tonne from a month earlier, data from Bursa Malaysia showed.